• Retroactive rate changes on existing balances will be prohibited, unless the account is 60 day past due.
• An account holder’s payments beyond the minimum automatically applies to the balance with the high rates.
• Promotional and teaser rates must last at least six months, and card issuers cannot raise rates during the first year an account is open.
• Credit card bills must be sent 21 days before payment is due.
• Unless a card holder has okayed over-limit transactions, credit card companies cannot charge over-limit fees.
• For account holders under 21 years of age, credit card companies must have the signature of a parent or another co-signer or proof that the account holder can repay credit.
• Account holders must have 45 days notice of any change in terms.
• Credit card companies must eliminate fees for paying by mail, phone or electronic transfer, unless users are paying for expedited services.
• Gift cards must have a minimum of a five-year life.

All these changes may take a little time to be fully implemented, but you may start seeing the effects sooner, rather than later. And while they’re meant to help consumers that struggle with credit cards and related debts, there will be rippling affects that will hit credit card users who don’t have any problems. Because credit card companies actually make a significant profit on card holders who struggle with payments and fees, they’ve dropped many of the costs that used to be associated with credit cards — like annual fees. But with that profit margin reduced by new limits on fees and interest rates, credit card companies will probably look for ways to charge for simply having a credit card, rather than using it irresponsibly. Rising interest rates, annual fees and other expenses look likely — though the exact changes to specific programs probably won’t be known for a while yet.

While these changes will protect consumers, it’s best to still work hard at paying off your credit cards in full and limiting your use of them where possible. It’s not inconceivable that your interest rate will jump when the Credit Cardholders’ Bill of Rights Act of 2009 actually starts affecting the way credit card companies do business. It’s also worth keeping a very close eye on any mail you receive from your credit card issuer. With things in flux, you’ll probably be getting more mail, if only to notify you of changes to your account. You don’t want to get caught unawares by such changes, so it’s worth making an effort to read and understand each message coming from your credit card issuer. And it’s possible that this bill may not be the last legislative change in the next couple of years. As consumers adjust to new spending patterns and credit card companies try new tactics to make money, it’s possible that the government will find it necessary to revisit these issues.

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Count Down to Credit Card Reform

Are You Really Ready to Cancel Your Card?

No matter how careful you are, canceling a credit card will cause a drop in your credit score: the score is based, in part, on the amount of credit you have available. With your account closed, you’ll simply have less credit available. That drop can be small and temporary — as long as you’re doing everything else right when it comes to your credit score — but it will show up if any one checks your credit. You may want to delay canceling your card if you’re expecting a credit check in the near future. If you’re applying for a mortgage or a car loan, wait to cancel your credit card until your funding goes through.

Eliminate Your Balance

If you’re still carrying a balance on your credit card when you cancel it, you’ll face a penalty on your credit score. Furthermore, depending on your credit card’s terms, you may be asked to pay your balance in full immediately upon cancellation — which just makes the cancellation process more complicated.

Instead, it’s worthwhile to pay off your balance before you even start thinking about canceling a card. Ideally, you can just pay off the balance entirely but transferring it to another line of credit may also be an option.

Close Your Account Completely

Rather than relying on a phone call to make sure your credit card is closed, you’ll want a little extra confirmation — considering the long list of potential problems, like identity theft or fees on accounts you thought were closed, it’s just a practical decision. To get that confirmation, take the following steps:

1. Call your credit card company and cancel the card over the phone. You may be directed to a retention specialist who will try to convince you to keep your account open.
2. Write a follow-up letter, informing the credit card company in writing that you are closing your account and requesting the company report that fact to the credit bureaus. In your letter, you need to include your name, account number, address and signature. Make two copies of the letter: file one and send the other by certified mail to the credit card company. That way, you’ll be able to prove that the company received your request to close your account.
3. Check your credit report. It can take about a month for an account closure to be reflected on your credit report, so wait thirty days before requesting a copy (you can get free copies of your credit report through Annual Credit Report.com). If there is a problem regarding your closed account, you’ll need to call the credit card company, as well as send another certified letter, to have them fix the mistake.

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Close A Credit Card — The Right Way

Requesting a Credit Freeze

In order to freeze your credit, you’ll need to contact each of the three credit bureaus — Experian, Equifax and TransUnion. With each credit bureau, you’ll need to request a separate credit freeze. There’s typically a fee associated with a credit freeze, making it less worthwhile to set up if you’re expecting to need credit in the near future. The fee is often between $5 and $10.

You can arrange to have your credit unfrozen at any time. If you do find yourself in a position where you need to access your credit, it’s generally a matter of just contacting the credit bureaus to do so — though it can take a little while to make your information again available for credit inquiries. That means you’ll want to plan ahead if you expect that you’ll need credit for something in the future. You can also choose to unfreeze your report for just one company, as needed.

It’s worth noting that your credit report is used for more than just opening lines of credit these days. Many employers use credit reports as part of their hiring process. Many landlords also use credit reports to determine the suitability of a prospective tenant. If you find yourself looking for a rental or a new job, you may want to make a credit freeze known during the application process, remove the freeze or otherwise make your credit report available to a potential employer or landlord.

Better than the Alternatives

There are a number of companies that offer identity-theft protection. In general, such services are not particularly useful: many simply set up credit freezes for their customers and charge much more than a $10 for the service. Others offer only minimal help.

On your own, it is possible to limit the effects of identity theft by being vigilant about where your accounts are being used and reviewing your credit report on a regular basis. That system can be effective, but if you don’t need credit, freezing your credit can make it easier for you to track your personal information. It’s generally still a good idea to review your accounts even if you have a credit freeze in place: it will not protect your existing accounts and there are some methods of identity theft that involve gaining access to your bank account or other funds not affected by lines of credit.

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Credit Freeze: Stop Identity Thieves Cold

If you have received the American Express offer, you may be considering taking it. After all, $300 can come in handy — and if you’re in a position to pay your balance, it generally makes sense to do so. But there are some pros and cons to closing a credit card account. One of the biggest issues is what it might do to your credit score. In most cases, closing an account can put a ding in your credit score. As long as you aren’t planning on needing a lot of new credit (taking out a mortgage, getting a loan for a new car or opening a new credit card account), a small drop in your credit score may not be as important of a drawback as it might have been in years past.

While it’s not an ideal situation, many people rely on their credit cards to cover expenses in emergencies. Closing a credit card account will make a line of credit unavailable, which could put someone in a pinch if he or she runs into trouble. Many people compromise on the situation: they pay off the balance, but keep the account open just in case. But, of course, going that way won’t earn a $300 incentive.

Paying off a credit card account can be beneficial in the long run. You’ll pay less in interest — and if you add in the $300 incentive, you’ll be coming out ahead. It’s also worth not having to worry about managing the balance of the card, as well as all the problems that go along with having a credit card (like giving identity thieves more opportunities).

The decision on whether to pay down the balance on a credit card and close the account isn’t limited to American Express customers, of course. With the variety of changes that companies are making to credit card terms — dropping credit limits, raising interest rates and so on — many customers are no longer comfortable with their credit card companies. If you read the fine print of paperwork that comes with any announcement of a change in the terms of a card, you’ll notice that credit card companies make a point of telling you that if you don’t like the changes, you’re welcome to close your account. If it won’t cause you any problems, it’s worth taking them up on their offer.

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Closing Credit Accounts: The Pros and Cons

There’s a reason I’m encouraging a little consumerism right now. Many credit card companies are closing accounts that haven’t been used recently. For most people, that’s a card that they’ve had for a long time and don’t use because it has the worst terms, because they opened the account when they were first establishing their credit. I know I’m in that boat: I have a credit card I got when I started college. The interest is insane, so I never use it. I would close that account myself, except it’s a major part of my credit history.

When you or your credit card company close an account that you’ve had open for a long time, your credit score is likely to take a hit. Depending on how much of your credit history that card is, the ding to your credit score should be minor — but it can be a major issue if you are applying for a loan in the near future. In most cases, there just isn’t anything you can do about an account closure after the fact. You can ask your credit card company to reverse the closure, but such reversals are very rare.

Another option — one that is a little more likely to happen — is that you can ask your credit card issuer for a new card with the same terms as the now-closed account. Your credit score will still be lower, because your credit history will still be shorter. However, you won’t be penalized for having less credit available to you — another major factor in computing your credit score. The status of your other credit cards may play a role in determining whether your credit card company will offer you a new line of credit: it is possible they won’t. However, you’ll still have a better chance than trying to get the company to reopen your old credit card.

It’s only ‘inactive’ cards that are facing closure — those credit cards that haven’t been used in several months. You can keep all of your cards active by making a charge every month or two. If you’re carrying a balance on your credit cards, this is one credit card issue you don’t have to worry about. Even if you’ve stopped making new purchases, as long as you keep making payments on your cards, they’ll still be considered active.

Credit card companies are stepping up such closures, in part to reduce their own liability. Even if you aren’t using all of your credit, it’s still a liability for credit card companies — especially during a time where more and more consumers are struggling with debt.

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One Reason to Use Your Charge Card

Starting at the beginning of the year, FICO scores will be calculated based on a new formula. The change is partly based on the increased abilities of technology meant for tracking consumer spending, as well as the fact that more consumers have credit available to them than when the FICO score was created. Fair Isaac Corporation will use the new formula to better describe and rank credit problems. In tests, the new FICO scoring system was able to predict defaults 5 to 15 percent better than the older model.

There will be several key changes that are likely to change your credit score. For one thing, the new formula offers a little more forgiveness for someone who has only one missed payment, as long as it’s isolated. In the past, a FICO score focused on the number of accounts a person had open and the amount of credit already available to them. The new formula will focus more on the balances actually carried on a consumer’s accounts.

One key technique for improving a credit score will go out the window with the new FICO score: piggybacking, or allowing someone with lower credit to be added to an account in order to improve their credit, will be harder to do. Typically used by parents who add their children to an account in order to jump start their credit history, the practice has been heavily abused in recent years by individuals with high credit scores selling their names. The reduced benefit to authorized users of accounts will cause some problems, according to Kiplinger: “…many of those authorized users are women. Many of them rely on their husbands’ FICO scores, and it will now take longer for those women to build up their own credit scores.”

Equifax and TransUnion will be switching over to the new system over the course of 2009. There’s no word yet on whether Experian will be making the switch soon.

In part, Fair Isaac’s change is in response to the current economic situation: lenders were unsure of the reliability of credit scoring models. That, combined, with their own economic issues, caused lenders to severely limit the credit they’re willing to offer. There is some hope that with a more reliable method of predicting defaults, lenders will increase the credit they’re willing to offer.

The FICO reconfiguration is a case of good news, bad news. For some consumers, the new formula will spit out a higher credit score. For many others, it’ll offer a lower score. But, either way, credit will be at least a little easier to get than it has been of late.

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FICO Reconfigures Credit Score Formula

How ChexSystems works

Banks usually will check your ChexSystems report before allowing you to open a new checking or savings account. Even one negative item on your report can be grounds for a bank to deny you an account. And since ChexSystems only records bad news, its reports can get you into some trouble. The way ChexSystems works is surprisingly simple: anytime a consumer does something wrong with his or her banking — bounces a check, overdrafts, runs a scam through a bank account — the bank has the choice to report it to ChexSystems. The last five years of reports on an individual makes up his or her overall Chex report.

ChexSystems doesn’t care about good news — even if you have a good overall banking history, your Chex report can be bad. And because banks want to protect themselves, as well as their other customers, they avoid offering accounts to individuals with anything on their Chex reports, when possible.

The situation isn’t entirely dire, though. Not all of your banking information winds up with ChexSystems, because your bank gets to choose what it will report and what it won’t. If, for instance, someone bounces a check but clears it up right away, most banks won’t report the incident. There are also some banks that will allow customers to open banks even if there are serious problems on their Chex reports — as long as those issues are several years in the past and all charges have been paid.

Get a copy of your Chex report

If you want to know exactly what’s in your Chex report, you can request a copy once a year — just like you can request a copy of your credit history from the three credit bureaus once a year. You can also request a copy of your Chex report if you’ve been denied a bank account in the past two months due to something in your report. To order your report, use Consumer Debit Resource’s tool. The same website provides a form to help you place a security alert on your Chex report if you have been the victim of identity theft.

Fix your Chex report

Unfortunately, improving is harder than improving your credit score. Your first step should be talking to a representative at the bank that issued the original negative report. You’ll have to work with them to settle the problem. Once the problem is settled, the bank will update its report to ChexSystems. Your Chex report will reflect the fact that you’ve paid or settled the account. The bank has the option of removing the issue from your report entirely, but that decision is at the bank’s discretion: you should make a point of requesting that your bank do exactly that — but there is no guarantee that they’ll do so.

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ChexSystems: A Fast Route To Trouble

AmEx customers who pay with plastic at the same places where Mrs. Bell shops and have the same mortgage lender have poor repayment histories, according to a letter sent by AmEx.

“They’re holding me accountable for someone else’s credit,” fumes Mr. Bell, a real-estate agent in Chadds Ford, Pa. His mortgage loan came from Countrywide Financial Corp., now part of Bank of America, and his wife uses the AmEx card at retailers Wal-Mart Stores Inc. and the Marshalls unit of TJX Cos. and to fill up her tank at Sunoco Inc. gas stations.

It’s not just American Express who’s cutting limits, though. And those shrinking limits can wreak havoc on your credit score, even if you aren’t carrying a balance. Credit scores are partially based on the ratio of debt you have to the debt you could have. Your credit limit marks the amount of debt you can afford — that you could have. If that number suddenly drops, so does your ratio.

Even worse, there’s no law stopping credit card companies from dropping your credit limit below the amount you currently owe. If that happens, you can get hit with overage charges immediately. The only protection you have against those sorts of fees is to carry only minimal balances. If you spot such a change on your credit card statement, it’s more than worth your while to call up your credit card company and ask to have your credit limit raised at least to the same level as your current balance. You can also ask to have the charges removed, but there’s no real guarantee.

Some credit card companies have gone so far as to cancel credit cards. While that seems mostly focused towards accounts that haven’t been used in a while, they do seem to be targeting individuals with high balances, especially if they live in areas hit hard by the housing downturn. That group is considered especially risky right now and have also been a significant portion of the credit card accounts with lowered balances or higher interest rates.

Remember, your bank or credit card company does have to notify you in writing of any changes they make to your account. This is a time to be especially diligent about opening your credit card statements, as well as any other mail you receive from your lender. I know more than a few people who just shred their bills, especially if they pay online. Now is probably not the best time to be using that method.

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The Real Credit Crunch: Is Your Credit Score Suffering?

Paulson’s move is already being described as “one of the most sweeping government interventions in private financial markets in decades.” Journalists and economists have spent the weekend discussing the consequences for the government, the companies and the economy. But what does a bailout mean for the rest of us?

Paulson’s Plans for Conservatorship

During the announcement, Paulson named four things that he planned to do with Freddie Mac and Fannie Mae:

1. The two companies will modestly increase their MBS portfolios (meaning that smaller banks will be able to issue more mortgages) until the end of 2009. Starting in 2010, the two companies will start reducing their MBS portfolios. For the most part, that means that Fannie Mae and Freddie Mac will be selling off the mortgages they hold to other companies, starting in 2010. Depending on how willing other companies are to buy mortgages, it may get harder to get a mortgage in 2010.
2. The Treasury Department and the FHFA will use Preferred Stock Purchase Agreements to make sure that both companies maintain a positive net worth, as well as guarantee to debt holders that they will be paid.
3. The Treasury Department is creating a new ’secured lending credit facility’ — a governmental agency that can lend money to companies like Fannie Mae when they can’t get loans elsewhere.
4. The Treasury Department is temporarily buying MBS in order to make sure that banks are capable of offering mortgages even with the normal backers / buyers of MBS slowing down their purchases.

Fannie Mae and Freddie Mac Stocks

The government isn’t helping out stockholders as a part of the bailout. Anyone with stock in either company is no longer receiving dividends and the values of those stocks have dropped dramatically. The fact that the government is stepping in has actually caused both stocks to fall further.

There’s no guarantee that the stock situation will improve, either. Unfortunately, if you hold stock in either Freddie Mac or Fannie Mae, you have very few options.

Freddie Mac and Fannie Mae Mortgages

If you currently have a mortgage held by either company, very little changes. You still have an obligation to make your payments and there shouldn’t be any changes to how the company operates at that level. The same goes for any other loans you have from either company, as well. The conservatorship is specifically set up to make sure that Freddie Mac and Fannie Mae continue operations as normal.

At upper levels, however, there will be quite a change up — executives and boards at both companies will be leaving.

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What Does the Freddie Mac and Fannie Mae Bailout Mean?

TransUnion is offering free credit-monitoring services to settle the claims that the company had illegally distributed private information about consumers for marketing purposes. TransUnion continues to deny any wrongdoing, but millions of U.S. consumers are eligible for this settlement. The settlement gives consumers the ability to sign up for either six or nine months of credit monitoring. The eligibility criteria is extremely broad: if you had any open credit account or line of credit between Jan. 1, 1987 and May 28, 2008. More than 150 million consumers are eligible for this settlement, and the law firm representing the plantiffs in the class-action suit against TransUnion says that fewer than 400,000 have signed up for the settlement so far.

The deadline to take advantage of this settlement is Sept. 24. To register, you’ll need to visit the site established to manage the settlement or call 866-416-3470. Remember, if you decide to take advantage of this settlement and you are married, your spouse will need to register — even if you share joint credit accounts, both you and your spouse have separate credit reports.

The settlement has not yet been finalized, and won’t be until after Sept. 24. When you register, you’ll have the option of selecting between four ‘payments’:

• Six months of credit monitoring.
• A cash payment (if money is available for distribution).
• Six months of credit monitoring and a potential cash payment.
• Nine months of enhanced monitoring service. (If you select this option, you can’t get any cash.)

Before you leap at that cash payment, you should know that it won’t be available utnil at least two years after the settlement is finalized by the court — if ever. And we’re certainly not talking about much money. TransUnion has agreed to pay $75 million into the settlement fund. Out of that, $150,000 immediately goes to nonprofit organizations. Then the lawyers’ fees, as well as any other fees or expenses, are paid out. Then, judgements and settlements for individual damage claims will be paid. Last in line are the regular consumers who register for the settlement. Even if you wait the full two years, there is no guarantee that you’ll get an actual check out of it. The price of TransUnion’s credit monitoring service for six months is $59.75. The nine-month version retails for $115.50. You’ll be able to start your six (or nine) months of credit monitoring just six months after the settlement is finalized. As long as you will use it, the credit monitoring option is probably the best bet.

During the time you will be covered by the credit-monitoring plan, you’ll be able to keep a closer eye on your credit than normal, allowing you to theoretically catch identity theft and fraud before it becomes a major issue. TransUnion notifies you of any major changes to your credit report within 24 hours, as well as allows you to lock your credit report. But remember, credit monitoring is meant to help you spot fraud and other problems — not prevent it.

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TransUnion Faces Class Action Settlement, You’re Probably Involved

There were a few small complications in the matter: he had a credit card with rewards points and there simply wasn’t a lower interest rate that American Express could give him on that card. But the company was more than happy to switch my husband over to another card with a much lower interest rate if he was willing to give up his rewards points. He thought it over and, yes, it was definitely a better proposition.

Credit card companies don’t ever offer to lower your interest rate out of the blue. Even if you improve your credit significantly, they’ll leave your interest rate alone because they make more money if that interest rate is higher. But that doesn’t mean that American Express, Visa and all the rest aren’t willing to make you a better deal. You just have to step up and ask.

It is easier if you have a little bit of leverage, of course. The best leverage is being able to tell your card’s representative that you’ve been on time with every payment. Being able to tell your credit card company about a great deal you’ve just received from one of their competitors doesn’t hurt, either. If you’re considering taking your business elsewhere, most credit card companies will do what it takes to keep your account. Occasionally, they might call your bluff though — but there are plenty of offers out there with zero-interest transfers if you decide to go through with changing cards.

The important thing to do is call up your credit card company and ask. Ask for a lower interest rate, ask to have a fee refunded, ask for a better deal. After all, the worse they can do is say, ‘no.’ The best they can do is significantly reduce the money you’ll end up paying them. This tactic can be applied (with varying degrees of success) to other credit situations. Your mortgage lender may not be willing to negotiate on the amount you pay but if you’re having trouble, as so many people are, they might be able to find some sort of solution. But if you don’t ask, all you have to look forward to is struggling quietly; if you don’t talk to the representative in charge of your account, you can’t take advantage of policies that afford companies a little leniency when it comes to good customers.

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The Secret to Getting Lower Interest Rates

That’s not how it works, though. Credit card companies are out to make a profit and they can make a lot more money if they handle your payments in other ways.

Your credit card provider does have to tell you about how they allocate payments, according to law. But most of us to examine all that paperwork that comes with a credit card as closely as we ought to. We really all ought to read the ‘payment allocation provision,’ though.

The Payment Allocation Provision

This provision tells you how your credit card company handles your payment, although it doesn’t necessarily go in to great detail. Look at Capital One’s payment allocation provision:

We may allocate payments and other credits and proceeds among the various segments of your account, and to charges and principal due within each segment, in any way we determine, including balances (including new transactions) with lower annual percentage rates (APRs) before balances with higher APRs.

Basically, the provision says that your credit card company is going to apply your payment however they wish. If, for instance, you owe money on your credit card that is accruing interest at different rates — maybe you are charged one rate for regular credit card transactions and another for cash advances — the credit card company can apply your payments to whichever portion of your debt they choose. It’s practically guaranteed that they’ll choose the portion with the lower interest rate for you to pay off first. After all, credit card companies make more money on debts with higher interest rates.

Your Options

Credit card companies have the legal right to chose how to allocate your payments. Most will continue to do so, no matter what you do. You shouldn’t just give in, though. You do have options.

You can call and ask your credit card company about their options. In general, they may not have many, but some companies allow you to mark your payments in such a way that they will be applied to the portion of your debt you prefer. This option is more common with student loans or car loans.

You can also transfer your debt to a 0 percent card. This option isn’t perfect, but can help as long as you are committed to paying off your credit card debt. Avoid making any other purchases on your 0 percent card, though: as soon as you do, you fall back into the same interest trap.

Beyond that, the best thing you can do is eliminate your credit card debt as soon as you can. It may seem impossible, but the faster you can reduce credit card debt the less interest you will wind up owing.

Just remember: credit card companies set their businesses up in their own favor. They like handing out credit cards — the more credit cards out there, the more money they make.

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The Big Secret: How Credit Card Companies Apply Payments

The Federal Reserve already has some proposals that they’re considering to drastically cut the opportunities for credit card companies to abuses their customers: federal banking regulators want to stop credit card companies from raising interest rates on existing balances. They also want to stop the common practice of applying your monthly payment to the portion of your debt with the lowest interest rate, a technique that helps credit card companies make more money off the amount you owe. They are also looking at ways to prevent companies from sending bills that you literally cannot pay in time — you know, those frustrating bills that you get the day they’re due, or even after the due date. You can also comment on these proposals through the same form, and even make suggestions, if you would like to.

Personally, there is one credit card practice that I think absolutely needs to be prohibited: most credit card companies charge you a fee if you pay your bill online or by phone. Your payment is more likely to arrive late if you send it in by mail; there are just more opportunities for delays, human error and factors you can’t control. That means that credit card companies are more likely to get late fees if you mail a check than if you make a payment online. It seems like credit card companies are trying to set us up for failure. Unfortunately, the Federal Reserve isn’t currently considering making a change to the laws governing payment methods.

There are also a few other suggestions that consumer advocacy organizations, such as the Consumers’ Union, would like to see on the agenda, but aren’t there yet. If any sound like a good idea to you, you might consider submitting comments to that affect.

• Limiting high “penalty” rates, and how long a card issuer can keep you at those levels.
• End random changes in interest rates for future purchases “at any time for any reason.”
• End all retroactive interest rate hikes, even if there has been one payment that is 30 days late.
• Prohibit account-opening fees that are more than 10 percent of the
  credit limit, rather than the Fed’s proposed 50 percent. Multiple
  over-limit fees also should be banned during a single billing cycle.

Any comments that you submit will become part of the Federal public record, along with your name and contact information. That’s because the Federal Reserve is using these comments to guide public policy and must be transparent about their actions. However, if you are concerned about your name appearing on such government documents, you may chose not to share your comments and stories.

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Tell the Fed Your Credit Card Story

There are steps you can take to protect yourself from credit card fraud. It’s up to you, though — saying that you plan to start doing these things in the future isn’t going to stop a problem now.

1. Review your statement as soon as you get it. As soon as you spot your credit card bill in the mail (or online), open it and go over it. Look for any charges you don’t recognize.
2. Keep your receipts. You’ll want to double check your receipts each month against your credit card, to make sure that charges are correct. Don’t throw away your receipts — there are people with no compunction about rooting through your trash. Personally, I keep all my receipts at least until I finish my taxes for the year, just in case I can deduct something. But if you choose to get rid of your receipts sooner, you should at least shred them before throwing them out. You can get a decent shredder for under $40 at most office supply stores.
3. Shred credit card applications. You should be shredding any sensitive information before throwing it out — and credit card applications are definitely sensitive. It’s very easy for someone to complete one of those pre-approved applications in your name and rack up bills without your knowledge.
4. Shop online carefully. Not all websites are completely secure, so you should think about how reliable a site seems before you purchase through it. Big sites that are known to do lots of transactions are generally okay, but if a website looks like no one has ever bought through them before, be cautious.
5. Keep an eye on your card. When you use a credit card to pay for something, watch where it goes. It may not always be in your sight, but the more observant you are, the more likely you are to catch someone trying something with your card.
6. Carry only the cards you need. On any given day, do you really need to carry a stack of credit cards thick enough to play a round of poker? Odds are that you’ll only need one or two, so leave the rest of the cards at home. This goes double if you’re traveling — the more cards you carry, the more likely you’ll lose at least one.
7. Write down your numbers. If anything does happen to your cards, you’ll need the contact information on the back of your card, as well as your account number on the front. It’s kind of a Catch 22, but you can make the situation easier by already having a list of both numbers. Want to make it super easy? Photograph both sides of your card with a digital camera, and save the files somewhere safe.

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7 Hints To Prevent Credit Card Fraud

Average late fees rose to $35 in 2007 from less than $13 in 1994, and fees charged when customers exceed their credit limits more than doubled to $26 a month from $11, according to CardWeb, an online publisher of information on payment and credit cards.

Mortgage lenders similarly added or raised fees associated with borrowing to buy a home — like $75 e-mail charges, $100 document preparation costs and $70 courier fees — bringing the average to $700 a mortgage…

Credit card interest rates are on the rise, as well, even for those customers with good credit.

It costs money to buy on credit, whether you’re purchasing a new home or just putting a bag of groceries on your Visa. Credit is expensive, and while various lenders work on recovering from the credit crisis, it’s going to get even pricier. It’s important to remember that credit card companies don’t send you all those preapproved offers out of the kindness of their hearts. They’re marketing their businesses in order to make money — from you.

There is only one way to avoid paying fees and interest, and that’s to stop using credit. Personally, I’m not entirely there yet, and I still have some debt I need to pay off, but I’m working on it. I know it’s the only way to go.

Very few people are ready to go completely cold turkey on their credit cards — very few can truly afford it. But there are steps that you can take.

• Use only one line of credit. You’ll still have to make payments on your other cards and lines of credit, but if you’re only adding to what you owe with one card, you will have a better handle on what you spend.
• Pay cash wherever you can, especially for anything beyond the bare necessities. You have to buy groceries and pay rent, but for consumer purchases, using only cash can help teach you to save up for purchases. Even better, you don’t pay any fees or interest on cash purchases.
• Don’t open new lines of credit. For mortgages and other loans, a big chunk of the fees occur whenever you get a new loan or open a new account. The same is true for refinancing and other major changes to your account.

There are plenty of personal finance advisers out there recommending extreme solutions. If you can handle an extreme approach to paying down debt and getting away from needing credit, I’m all in favor of it. Most of us need slower and steadier methods, though. We all have to look at our own financial situations and chose the best path for ourselves.

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Cutting the Credit Cords

Where You Live
We know that banks are starting to use new and complicated application criteria to weed out potential ‘bad’ loan customers, and credit card companies are hot on their heels. Customers who live in areas hardest hit by the housing crisis, such as California, Nevada, and Florida will either be outright denied, or have a much lower credit line than people in neighboring states. Marketing campaigns in those areas and others have been limited, and automatic credit line increases have been halted.

What You Do
Your job may also determine your credit worthiness, and we’re not talking about how much you make a year. People with jobs in finance, construction, and even entertainment industries are being targeted as ‘high risk.’ Even those who have been faithful, paying customers for years suddenly are finding themselves curtailed. From The Wall Street Journal:

Peter Schiff, president of securities-brokerage firm Euro Pacific Capital in Darien, Conn., has been downbeat on the economy for months but never thought he was the kind of customer that AmEx would worry about. That changed a few months ago when one of his employees tried to book a block of hotel rooms for a seminar on the firm’s corporate AmEx card. The card was declined, and Mr. Schiff subsequently discovered that AmEx had cut his $40,000 credit line to $4,500.
(WSJ Online, by Robin Sidel, Monday, June 23, 2008)

Cardholders who find themselves with slashed credit lines are being asked for a lot more personal information than in the past. Small business owners in particular are being essentially audited to make sure of their solidarity. Credit card companies are hiring third parties to do their research work, finding trends, identifying risky customer groups, and conducting investigations on those ‘at risk’ cardholders.

This practice, while designed to minimize loss, may backfire. Many customers who find their credit lines cut or interest rates inflated are trying to contact their credit companies to either demand explanations, or to have their previous status re-instated. Almost all of them are finding those companies unyielding. Usually the customers will close the account and look elsewhere for the limits they had previously. An even worse scenario is one where a customers credit limit is cut or their interest rate is raised to the point where they will fall into default even quicker.

Each companies criteria for selecting customers is different, which is why it is possible for one company to deny a customer and another to approve them. The techniques for determining customer risk are usually a closely guarded industry secret. What most are saying is that FICO scores need to be higher, and that across the board banks and credit card companies are getting much more selective and conservative.

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Credit Companies Are Getting Personal

Having so many cards can be a very bad thing, though. Even if you aren’t tempted to use them, there are reasons you need to cut that deck. Personally, I’m down to two cards and I plan to keep it that way. One is my great deal, cash back card that I rely on for most purchases and the other is my emergency card. A few more cards probably wouldn’t hurt me, but there are plenty of reasons to keep my wallet thin.

Most importantly, having a lot of available credit can actually be detrimental if you’re applying for a mortgage or other loan. Think of it this way: between 15 credit cards, you might have $15,000 worth of credit available beyond your current balances. If you apply for a mortgage the lender will want to know if you can pay off the mortgage even if you were to make $15,000 worth of purchases on those cards. The lender will assume that you have 15 cards because you’re planning to make purchases on all 15 of them. It’s a reasonable assumption, too — why bother to have so many different cards, otherwise?

Numerous credit cards can also open you up to a greater risk of identity theft. It’s simple math: the more places your personal information is floating around, the higher the odds that someone is going to take a look at it that shouldn’t. And if you have a record of taking out new credit cards, you may miss someone using your identity to do the same.

It’s easy to trip up with extra credit cards, too. The more cards you have, the more likely you are to miss a payment, even through plain old forgetfulness. It’s also easier to rack up debt, even if you’re trying to be responsible. If you don’t look at every statement every day — and honestly, who does? — it’s easy to forget that you charged a certain amount on a card and need to pay it off.

If your wallet needs to lose some of its credit card weight, get a copy of your credit report to help you decide which cards to cancel. You always want to keep your oldest account open — otherwise, your credit history can look shorter than it really is. Besides that oldest card, if there are any cards that you simply don’t use, I’d recommend canceling those first. From there, it’s simply a matter of checking which of your cards has the best interest rates combined with the best perks (cash back, for instance).

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Cut Down on The Credit Cards

Employers don’t want to hire applicants who have problems in other parts of their lives, and that includes debt. It’s more than just wanting workers to keep their minds on their jobs, too. Employees with heavy loads of debt are much likelier to harm a company — think embezzlement, corporate espionage or misuse of company funds. What employer wouldn’t want to prevent those sorts of things from happening to their businesses?

During the application process for a new job, your potential employer might ask you to sign a form giving them permission to run a check on your credit. The credit agency won’t give them a full copy of your report, but they’ll handover the grand majority of your information. Legally, credit reporting agencies cannot provide an employer with the following:

• your marital status
• your year of birth
• your account numbers

Most employers are simply looking for two things: warning signs that you might be a financial risk and a general sense of your responsibility. If you are submitting applications, your best bet is to have good credit. But many of us have a few slip-ups here and there on our records. For the average job applicant, it can be hard to tell just what might cause a problem with an employer.

There may not be too much for you to worry about, though. Most hiring managers are not going to pounce on every little mistake. There are also a few steps you can take to rebuild your credit.

• Consider paying your monthly payments in full and on time a priority — even if you’re unemployed.
• If you can’t make your payments, contact your creditors and establish some sort of payment plan before you become delinquent.
• Avoid opening new accounts or applying for new credit just before starting your job hunt.
• Reduce your debt (the money you owe) to credit (the money lenders will give you) ratio.

If you’re still uncomfortable with your credit report, you can refuse to grant permission for prospective employers to look at it. Before you make that decision, though, you should be aware that many employers will remove your name from consideration immediately. They’ll assume that you have something to hide. A better approach — although not without risks — is to grant permission but ask the hiring manager to discuss your credit report with you before making a decision. Assuming your interviewer agrees, you’ll have a chance to point out extenuating circumstances and argue your case.

If you’re planning a career in banking, security, finance, public service and other sensitive fields, your credit report can be crucial. It’s worth making the effort now to improve your credit and build a history that you wouldn’t mind your employer looking over.

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Searching For A Job? Check Your Credit First

1. Charge cards with zero balances help build two things. They help you build a longer credit history, making you look more financially stable to potential lenders. The zero balance also helps to widen the debt to available credit ratio. The trick with paid off credit cards is to keep track of them—make sure that you aren’t incurring any annual fees and make sure that they have your current information.

2. In my post about saving money at the summer sales, I made not of the extra discounts that are often offered to people who have store accounts. There are plenty of department stores that offer customers a discount if they pay with the store’s charge card. This discount is often as much as fifteen percent! The best way to shop at these stores is to pay for your purchases with your charge card and then either pay the card’s balance with another cashier or to go home and immediately write a check for the amount you just spent and send it off to the charge company.

3. Some credit cards come with things like bonus points, frequent flier miles and cash returns. The best way to use these cards is just like the way you would use a store charge card. Use the credit card to pay for your purchase and then go home and immediately pay the balance. Often you can do this online!

4. By using your cards regularly (and paying them off regularly) you are building a positive credit history and increasing your credit score! Future lenders, when they look at your credit history will see how responsible you are with your credit cards and how quickly you pay your balances and be more likely to loan you money because you have proven that you are financially responsible.

5. If you start canceling all of your credit cards, when you look to purchase a car or a home later on, your lender might wonder why you were so hasty to close your accounts. If it looks like you don’t trust yourself, why would the banks trust you?

These are just a few reasons to keep your credit and charge accounts open. Obviously you know yourself and if you feel like the temptation of having available credit might be too hard too much then you need to follow your instincts. If, however, you feel like you’ve learned to handle your credit responsibly, you should think twice before you start cutting your cards and contacting the companies. Sometimes having credit available to you can be a great thing!

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Why You Should KEEP Your Credit Cards

A lot of people suggest handling a mortgage in exactly the same way. Any payment you make beyond your monthly required payment goes directly towards the principal amount of the mortgage — meaning that you’re not paying off extra interest, and will, in the long run, save you money.

But there are some drawbacks to prepaying a mortgage in this fashion, and even to paying off debt quickly, depending on your interest rates. There’s no question that you should at least make the minimum payments each month, but there may be ways to take better advantage of other money.

Do you have a 401(k)? Depending on the interest on your debt, you may actually come out ahead in the long run if you can invest your money in a retirement account. You’ll have to run the numbers for yourself, but if your employer matches the money you invest in your 401(k), there is almost no reason that should convince you to not invest up to the matching limit. While prepaying your mortgage can save you money on interest, your employer is essentially offering you free money that you cannot get any other way if one of your benefits is a 401(k) matching program! And who wants to turn down free money?

You might also decide against making extra payments on any debt if those extra payments could put you in danger of building up more debt. If you have no cushion of cash, no emergency savings, you can put yourself in danger of racking up more debt if something unexpected happens. Having the money to deal with emergencies should take precedence over paying off debt quickly. However, if you can place the money you were planning to direct towards your mortgage or credit cards into savings and build up a decent emergency fund, there is no reason that you can’t start up those extra payments after you’ve built up a healthy cushion.

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Do Bigger Payments Really Make For A Faster Payoff?